Endowment Fund

An endowment fund is normally understood as a perpetual fund from which only the earnings are distributed. The word “earnings” is generally used as a synonym for “profits;” a more appropriate accounting term is “income.”

  • Ordinary income is a term that generally refers only to interest and dividends.
  • Income may also include capital gains (realized gains) and the change in the market value of investments (unrealized gains).

The distribution policy of an endowment fund can define exactly what “income” it wants to use as a basis for distribution. The most straightforward method is to use “ordinary income” since it usually represents cash paid to the endowment. A simplified alternative is to define the distributable amount as a percentage of the market value of all endowment assets. Although this method may require a small liquidation of the endowment investment, it recognizes the total growth of the endowment assets and therefore all categories of income.

  • For example, a $10,000 gift to an endowment fund is permanently invested in the fund. Only the interest or a portion thereof is used for the purpose designated by the donor.
  • An easy alternative is for 5% of the market value of the endowment assets to be distributed each year. Thus, any realized or unrealized gains may be included in the distribution.

What is the CSD Endowment Fund?

The CSD Endowment Fund was established to provide an additional source of income for the Central States District Association of Chapters for music education, membership recruitment, charitable activities, conventions, contests, festivals and music schools in support of members and chapters of the district.

The Central States District Association of Chapters, SPEBSQSA, Inc. is an IRC Section 501(c)(3) organization and, as such, outright gifts are income tax deductible to the donor.
How do I give to the CSD Endowment Fund?

Outright gifts by members may be given to the CSD Endowment Fund in cash, securities, assignment of life insurance policies or real estate. Bequests, the giving of assets through a will, may also be given to the CSD Endowment Fund in:

  • Specific bequests of a percentage of one’s estate, a dollar amount, or a specific piece of property;
  • Contingent bequests, which designate the CSD Endowment Fund as the beneficiary if other beneficiaries do not survive;
  • Residuary bequests, which designate the CSD Endowment Fund to receive the remainder of one’s estate after all specific bequests have been made.

Chapters need to encourage these types of gifts when they plan their charitable giving each year. To set a positive example of responsibility, the chapters should consider setting the example by giving ten percent of all charitable donations to the CSD Endowment Fund.

Do I need to inform CSD that I’ve made a gift in my will?

You are not required to disclose your specific estate plans to anyone. CSD, however, likes to recognize your gift during your lifetime and offers information about giving. In addition, your generosity can serve as an inspiration to others.

How much does CSD have in their Endowment Fund and what are they doing with the income?

As of December 31, 2002 CSD has over $1,400 in the fund. All earnings are currently being reinvested in the Fund until the Fund reaches $10,000 in value when we will start designating a use of the income.

For More Information contact the CSD Endowment Fund Chairman, Paul D. Cartwright, 4216 92nd Court, Urbandale, IA 50322.

Phone (515) 278-8656 or e-mail PDCartwright@netins.net